Ark Restaurants Corp. (Nasdaq:ARKR) today reported financial
results for the second quarter ended March 28, 2020 and announced
that the Company's Board of Directors has suspended the declaration
and payment of the quarterly dividend until such time as it deems
appropriate to reinstate.
COVID-19 Update
The Company’s 2020 fiscal year started strong with revenues and
same store sales up 7.3% and 3.5%, respectively for the first
quarter compared to the prior year and continuing through February.
However, as the novel Coronavirus (“COVID-19”) rapidly spread
throughout the world and to the United States we began to
experience the impacts of COVID-19 during March 2020, resulting in
a decline in traffic in early March and the government mandated
temporary closures of all of our restaurants during the last two
weeks of March 2020, with all locations closed as of March 28,
2020. In addition to the decrease in restaurant revenue from the
closures, the Company estimates that it incurred approximately
$700,000 of costs directly related to COVID-19 in the 13 weeks
ended March 28, 2020 consisting primarily of payments to employees
for paid-time off during restaurant closures, inventory waste, and
rent and rent related costs for closed restaurants from the day
that they closed.
In response to these business disruptions and liquidity concerns
caused by the COVID-19 pandemic, the Company took the following
actions:
- Furloughed all hourly employees and approximately 95% of
restaurant management personnel, while enacting temporary salary
reductions for all remaining restaurant management personnel. In
addition, the Company temporarily reduced the pay of all corporate
and administrative staff by 50% to 75%, temporarily reduced senior
management salaries by 75% to 95%, and temporarily suspended all
board fees.
- Subsequent to the second quarter of 2020, the Company entered
into a Payment Suspension Agreement with its bank which deferred
all monthly interest payments through June 1, 2020 and deferred
aggregate principal payments of $675,000 due on June 1, 2020 to the
respective loan maturity dates. In addition, our bank agreed to
relaxed financial covenants through fiscal Q3 2021.
- Indefinitely deferred the payment of the $0.25 dividend
declared on March 2, 2020.
- Suspended future dividend payments until such time as the Board
deems appropriate to reinstate.
- Canceled or delayed all non-essential capital
expenditures.
- Suspended the vast majority of lease payments for the months of
April, May and June 2020 and is currently in negotiations for rent
concessions, abatements and deferrals with its landlords to reduce
these lease payments. While some landlords have agreed to certain
concessions subsequent to quarter end, there can be no assurance
that the Company will be successful in obtaining all, or any, of
the relief it is continuing to seek.
- Certain Company subsidiaries applied for and received an
aggregate of approximately $14.9 million of loans under the
Paycheck Protection Program of the Coronavirus Aid, Relief and
Economic Security Act (the “CARES Act”), which was enacted March
27, 2020 (see below).
- Utilized additional provisions of the CARES Act to obtain tax
savings as well as the deferral of our portion of social security
taxes to future years.
The full impact of the COVID-19 outbreak continues to evolve as
of the date of this report. Management is continually evaluating
the impact of the global crisis on its financial condition,
liquidity, operations, suppliers, industry, and workforce and will
take additional actions as necessary. The disruption in operations
has led the Company to consider the impact of the COVID-19 pandemic
on its liquidity, debt covenant compliance, and recoverability of
long-lived and ROU assets, goodwill and intangible assets, among
others. If these disruptions continue, the Company expects a
continued material negative impact on its consolidated financial
condition, future results of operations and liquidity. The extent
of such negative impact will be determined, in part, by the
longevity and severity of the pandemic.
Due to the rapid development and fluidity of this situation, the
Company cannot determine the ultimate impact that the COVID-19
pandemic will have on the Company’s consolidated financial
condition, liquidity, and future results of operations, and
therefore any prediction as to the ultimate material adverse impact
on the Company’s consolidated financial condition, liquidity, and
future results of operations is uncertain. We cannot predict how
soon we will be able to reopen all of our restaurants at full
capacity, and our ability to reopen will depend in part on the
actions of a number of governmental bodies over which we have no
control. Moreover, once restrictions are lifted, it is unclear how
quickly customers will return to our restaurants, which may be a
function of continued concerns over safety and/or depressed
consumer sentiment due to adverse economic conditions, including
job losses.
Paycheck Protection Program Loans
As a result of the Company being a micro-cap public company with
limited public float and trading, it has limited access to equity
and debt capital markets compared to other larger public companies.
In addition, the Company has limited capacity under its current
credit facilities that substantially limit its ability to borrow or
take on any significant additional debt. Accordingly, subsidiaries
of the Company applied for, and received, an aggregate of
approximately $14.9 million in Paycheck Protection Program loans.
Consistent with the purpose of the Paycheck Protection Program, the
Company intends to use those funds primarily to bring back its
workforce, as it continues to reopen restaurants and rebuild its
business. Before its subsidiaries applied for the loans, the
Company determined that, considering the current economic
uncertainty, the Paycheck Protection Program loans were necessary
to support their ongoing operations.
Before accepting the loans, the Company conducted an extensive
and comprehensive review, including consultations with its outside
advisors, to validate that it met the guidance issued by the U.S.
Small Business Administration. In making that determination, the
Company and its subsidiaries considered their current business
activity and the Company’s ability to access other sources of
liquidity sufficient to support ongoing operations in a manner that
is not significantly detrimental to its business.
Second Quarter 2020 Financial Results
Total revenues for the 13 weeks ended March 28, 2020 were
$34,002,000 versus $35,311,000 for the 13 weeks ended March 30,
2019. The 13 weeks ended March 28, 2020 includes revenues of
$3,058,000 related to JB’s on the Beach in Deerfield Beach, FL
which was acquired on May 15, 2019.
Total revenues for the 26 weeks ended March 28, 2020 were
$77,516,000 versus $75,859,000 for the 26 weeks ended March 30,
2019. The 26 weeks ended March 28, 2020 includes revenues of
$5,480,000 related to JB’s on the Beach in Deerfield Beach, FL
which was acquired on May 15, 2019. The 26 weeks ended March 30,
2019 includes revenues of $1,039,000 related to Durgin-Park which
was closed January 12, 2019.
Company-wide same store sales are not meaningful as a result of
the temporary closure of all of our restaurants in March 2020.
The Company’s EBITDA for the 13 weeks ended March 28, 2020,
adjusted for non-controlling interests, non-cash stock option
expense and loss from lease termination was ($531,000) versus
EBITDA adjusted for non-controlling interests, non-cash stock
option expense and losses incurred on the closure of Durgin-Park
(discussed below) of $1,323,000 during the same 13-week period of
last year. Net loss for the 13 weeks ended March 28, 2020 was
($1,778,000) or ($0.51) per basic and diluted share, compared to a
net loss of ($669,000) or ($0.19) per basic and diluted share, for
the same 13-week period in the prior year.
The Company’s EBITDA for the 26 weeks ended March 28, 2020,
adjusted for non-controlling interests, non-cash stock option
expense and loss on lease termination was $2,955,000 versus EBITDA
adjusted for non-controlling interests, non-cash stock option
expense and losses incurred on the closure of Durgin-Park
(discussed below) of $3,867,000 during the same 13-week period of
last year. Net loss for the 26 weeks ended March 28, 2020 was
($265,000) or ($0.08) per basic and diluted share, compared to a
net loss of ($731,000) or ($0.21) per basic and diluted share, for
the same 26-week period in the prior year.
As of December 29, 2018, the Company determined that it would
not be able to operate Durgin-Park profitably due to decreased
traffic at the Faneuil Hall Marketplace in Boston, MA, where it was
located, and rising labor costs. As a result, included in the
Consolidated Statement of Operations for the 13 and 26 weeks ended
March 30, 2019 are losses on closure in the amount of $39,000 and
$1,106,000 consisting of: (i) impairment of trademarks of $721,000,
(ii) accelerated depreciation of fixed assets of $333,000, and
(iii) write-offs of prepaid and other expenses of $52,000. The
restaurant was closed on January 12, 2019.
The Company adopted the new lease accounting standards on
September 29, 2019 (the first day of fiscal year 2020) which
requires us to recognize assets and liabilities for leases with
lease terms of more than twelve months on our balance sheet. We
used a modified retrospective approach and therefore did not
restate comparative periods for those lease contracts for which we
have taken possession of the property as of September 28, 2019.
Accordingly, prior period amounts were not revised and continue to
be reported in accordance with the accounting standards then in
effect. As a result of the adoption of this standard, we recorded
right-of-use assets of $62,330,000 and lease liabilities related to
our real estate operating leases of $63,943,000. The adoption of
this standard did not materially impact retained earnings or our
Consolidated Condensed Statement of Operations and had no impact on
cash flows.
Restaurant Re-Openings
As a result of state and local governments lifting stay at home
orders and mandatory shut-down requirements, as of June 22, 2020,
the Company has reopened: (i) all of its properties located in
Florida and Alabama, (ii) its operations in the New York-New York
Hotel & Casino Resort in Las Vegas, (iii) Sequoia in Washington
DC, (iv) The Porch at Bryant Park in New York, NY, and (v) Bryant
Park Grill and Café in New York, NY, at varying levels of limited
capacity as allowed by federal, state and local governments.
About Ark Restaurants Corp.
Ark Restaurants owns and operates 20 restaurants and bars, 17
fast food concepts and catering operations primarily in New York
City, Florida, Washington, D.C., Las Vegas, Nevada and the gulf
coast of Alabama. Five restaurants are located in New York City,
two are located in Washington, D.C., five are located in Las Vegas,
Nevada, three are located in Atlantic City, New Jersey, three are
located on the east coast of Florida and two are located on the
Gulf Coast of Alabama. The Las Vegas operations include four
restaurants within the New York-New York Hotel & Casino Resort
and operation of the hotel's room service, banquet facilities,
employee dining room and six food court concepts and one restaurant
within the Planet Hollywood Resort and Casino. In Atlantic City,
New Jersey, the Company operates a restaurant and a bar in the
Resorts Atlantic City Hotel and Casino and a restaurant in the
Tropicana Hotel and Casino. The operation at the Foxwoods Resort
Casino in Connecticut consists of one fast food concept. The
Florida operations include the Rustic Inn in Dania Beach, Shuckers
in Jensen Beach and JB’s on the Beach in Deerfield Beach, and the
operation of four fast food facilities in Tampa and six fast food
facilities in Hollywood, each at a Hard Rock Hotel and Casino
operated by the Seminole Indian Tribe at these locations. In
Alabama, the Company operates two Original Oyster Houses, one in
Gulf Shores and one in Spanish Fort.
Cautionary Note Regarding Forward-Looking Statements
Except for historical information, this news release contains
forward-looking statements, within the meaning of Section 27A of
the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements
involve unknown risks, and uncertainties that may cause the
Company's actual results or outcomes to be materially different
from those anticipated and discussed herein. Important factors that
might cause such differences are discussed in the Company's filings
with the Securities and Exchange Commission. The Company disclaims
any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. Actual results could differ materially from those
anticipated in these forward-looking statements, if new information
becomes available in the future.
ARK RESTAURANTS CORP.
Consolidated Statements of Operations
For the 13- and 26-week periods ended
March 28, 2020 and March 30, 2019
(In Thousands,
Except per share amounts)
13 Weeks Ended March 28, 2020
13 Weeks Ended March 30, 2019
26 Weeks Ended March 28, 2020
26 Weeks Ended March 30, 2019
TOTAL REVENUES
$
34,002
$
35,311
$
77,516
$
75,859
COSTS AND EXPENSES:
Food and beverage cost of sales
9,578
9,791
20,518
20,268
Payroll expenses
13,103
12,979
28,224
27,084
Occupancy expenses
3,830
3,808
9,269
8,812
Other operating costs and expenses
5,654
5,236
10,982
10,211
General and administrative expenses
2,397
2,193
5,451
5,601
Loss of termination of lease
364
—
364
—
Loss on closure of Durgin-Park
—
39
—
1,106
Depreciation and amortization
1,012
1,187
2,208
2,393
Total costs and expenses
35,938
35,233
77,016
75,475
OPERATING INCOME (LOSS)
(1,936
)
78
500
384
INTEREST EXPENSE, NET
242
331
688
629
LOSS BEFORE PROVISION (BENEFIT) FOR INCOME
TAXES
(2,178
)
(253
)
(188
)
(245
)
Provision (benefit) for income taxes
(414
)
423
(95
)
446
CONSOLIDATED NET LOSS
(1,764
)
(676
)
(93
)
(691
)
Net (income) loss attributable to
non-controlling interests
(14
)
7
(172
)
(40
)
NET LOSS ATTRIBUTABLE TO ARK RESTAURANTS
CORP.
$
(1,778
)
$
(669
)
$
(265
)
$
(731
)
NET LOSS PER ARK RESTAURANTS CORP. COMMON
SHARE:
Basic
$
(0.51
)
$
(0.19
)
$
(0.08
)
$
(0.21
)
Diluted
$
(0.51
)
$
(0.19
)
$
(0.08
)
$
(0.21
)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING:
Basic
3,500
3,475
3,499
3,475
Diluted
3,500
3,475
3,499
3,475
EBITDA Reconciliation:
Loss before provision (benefit) for income
taxes
$
(2,178
)
$
(253
)
$
(188
)
$
(245
)
Depreciation and amortization
1,012
1,187
2,208
2,393
Interest expense, net
242
331
688
629
EBITDA (a)
$
(924
)
$
1,265
$
2,708
$
2,777
EBITDA adjusted for non-controlling
interests, non-cash stock option expense and losses on lease
termination and the closure of Durgin-Park
EBITDA (as defined) (a)
(924
)
1,265
2,708
2,777
Net (income) loss attributable to
non-controlling interests
(14
)
7
(172
)
(40
)
Non-cash stock option expense
43
12
55
24
Loss on lease termination
364
—
364
—
Loss closure of Durgin-Park
—
39
—
1,106
EBITDA, as adjusted
$
(531
)
$
1,323
$
2,955
$
3,867
(a)
EBITDA is defined as earnings
before interest, taxes, depreciation and amortization. Although
EBITDA is not a measure of performance or liquidity calculated in
accordance with generally accepted accounting principles ("GAAP"),
the Company believes the use of this non-GAAP financial measure
enhances an overall understanding of the Company's past financial
performance as well as providing useful information to the investor
because of its historical use by the Company as both a performance
measure and measure of liquidity, and the use of EBITDA by
virtually all companies in the restaurant sector as a measure of
both performance and liquidity. However, investors should not
consider this measure in isolation or as a substitute for net
income (loss), operating income (loss), cash flows from operating
activities or any other measure for determining the Company's
operating performance or liquidity that is calculated in accordance
with GAAP, it may not necessarily be comparable to similarly titled
measures employed by other companies. A reconciliation of EBITDA to
the most comparable GAAP financial measure, income before provision
for income taxes, is included above.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200622005668/en/
Anthony J. Sirica (212) 206-8800 ajsirica@arkrestaurants.com
Ark Restaurants (NASDAQ:ARKR)
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